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Trade challenges

LiveMint 19-04-2017Livemint

The International Monetary Fund’s (IMF’s) latest World Economic Outlook report has struck a cautiously optimistic note.

One of its interesting facets is the projected rebound in global trade. According to the IMF, global trade volume will expand 3.8% this year and 3.9% in 2018. This is noteworthy given the sharp slowdown in global trade volume last year, when its growth rate dipped below global gross domestic product.

But it would be a mistake to read too much into this. The underlying structural factors have not changed. Research has shown that global value chains have been shortening for a while now: the benefits from advances in communications technology have begun to plateau while advances in automation and rising labour costs in emerging economies mean that the scope for labour arbitrage is narrowing. Political developments in countries such as the US and the UK, meanwhile, are raising the costs of trade.

Maintaining global trade growth is going to remain a challenge in the current political climate.